Last year, prior to the big SpaceXplosion -- which kind of knocked SpaceX off the rails -- we spent a lot of time digging into SpaceX's finances. We asked: How does SpaceX make money? And we answered the question: "How profitable is SpaceX" when it makes all that money?
Much of this was based on educated guesswork, however, as we extrapolated what we knew about the finances at SpaceX rivals Boeing (NYSE:BA), Lockheed Martin (NYSE:LMT), Orbital ATK (NYSE:OA), and Airbus (OTC:EADSY), and applied it to what we thought that might mean for SpaceX's own finances. It would have been a whole lot easier to just take a good hard look at SpaceX's own financial documents, and get the answers straight from the source.
Lucky for us -- and for you -- The Wall Street Journal just did that.
In a detailed, multi-page expose, the Journal revealed last month that it has come into possession of a treasure trove of internal financial documents from SpaceX. Combined with interviews of ex-SpaceX staff, the Journal was able to put together a pretty good picture of SpaceX's finances.
It isn't a pretty picture. Here's what we know.
Wall Street Journal spills the beans on SpaceX
SpaceX likes to portray itself as a growing rival to space incumbents such as Boeing and Lockheed, Airbus and Orbital ATK. But in fact, SpaceX's revenue growth halted -- temporarily, we hope -- in 2014. Two failed space launches in the past two years curtailed launch activity at the space start-up, with the result that revenue actually peaked in 2014, at roughly $1 billion.
SpaceX's sales then declined to just $945 million in 2015, when the company conducted only six launches. (Revenue may have grown again in 2016, or it may not have. The documents the Journal obtained apparently didn't extend into 2016.)
What the documents do show, though -- and show quite clearly -- is that no matter how much revenue SpaceX records, it's not earning much profit from that revenue.
Dissecting SpaceX's finances
As revealed in the Journal's report, SpaceX turned just a small fraction of its $1 billion in 2014 launch revenue into operating profit -- much less net profit. The numbers aren't entirely clear from the Journal's chart, but appear to show SpaceX earning an operating profit of perhaps 0.2% on $1 billion in revenue -- profitability far below the 10%-ish profit margin that Boeing earns on its space operations, or the 12.6% operating profit margin at Lockheed Martin.
That bleak situation got even worse in 2015 when a small reduction in launch revenue sufficed to push SpaceX deeply into the red, and forced the company to record a $260 million loss on $945 million in revenue.
What SpaceX hopes to earn
SpaceX's successful return to space last month holds forth the promise that things will improve in 2017. Prior to the September SpaceXplosion, documents show that SpaceX was targeting $1.8 billion in launch revenue in 2016, and aiming to earn $55 million in profit thereon. While it probably didn't get there in 2016, there's still a chance that it could succeed in 2017 -- and achieve a 3% operating profit margin.
And that's your answer right there: Currently, all indications suggest that SpaceX is not profitable, but losing money. Only if things go well, and SpaceX regains its footing in 2017, can we hope that the company will achieve positive operating profit margins of 3%.
Even if SpaceX succeeds at this, though, it would still be earning only roughly half the 5.7% operating margin that Airbus earns at its "Defence and Space" business (as reported by S&P Global Market Intelligence). SpaceX's targeted $55 million profit would also be a small fraction of the $400 million in annual profit that the Boeing and Lockheed joint venture ULA earns. On the other hand, SpaceX would eclipse the break-even profits at Airbus' dedicated space launch subsidiary, Arianespace -- and SpaceX could grow its profit margins in the future if its plans to begin reusing relanded rockets, at lower cost than using "expendable" rockets, pan out.
SpaceX 2.0: A New Hope
So what's the upshot for SpaceX for investors who hope to one day invest in its IPO, and for investors who already, today, own a piece of SpaceX through their investment in Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) stock? Simply put, the documents the Journal unearthed show that SpaceX is not nearly as profitable an operation as we once believed it to be..
There's also a corollary conclusion, though, that affects investors in the space industry in general. Lacking substantial profits from its launch business, SpaceX is going to have a very hard time financing a trip to Mars -- a voyage it hopes to make as early as next year -- and a voyage that could inspire a whole host of other companies to accelerate their own races to space.
How does SpaceX plan to fund its first trip to Mars in 2018 and the dozens of follow-up trips it hopes to make in the years and decades to follow? Tune back in next week for the answer.
(But here's a hint: It will involve satellites.)